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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (8064)	5/26/2001 3:22:27 PM
From: Chris	Respond to of 52237

excerpt from L3 Spent last night listening to Greenspan's speech and it is amazing what the press doesn't tell you. I couldn't find it anywhere on CSPAN Thursday night but it was on last night. My interpretation of his speech was basically we were in a bubble, and when the economy finally started to slow, the speculation and "exuberance" was still running rampant on Wall Street so they couldn't drop rates or they would have just made things worse. They basically had to wait until things were obvious enough that stock prices were coming down to more reasonable levels. Now prices are again shooting up despite there being no signs of recovery and there are more danger signs that the worst is still yet to come. The Fed tries to make their actions based on the worst outcome. Therefore even though stock prices are again acting exuberant, the economy is not going to see inflation in the immediate future since companies have little pricing power, employment is loosening and oil seems to have stabilized but is at risk for more recessionary pressures so they will likely keep cutting rates even though inflation may come farther down the road. Basically it is short term recession problems more than short term inflation that is the greater threat and they will deal with inflation later. IF the economy does turn around, growth in high tech will be much slower than before but hopefully more sustainable. We are on the brink of consumers slowing their spending and making this recession worse so we are giving free credit as fast as we can hoping people will jack up their debt to even higher record levels and pull us out of this. During the question/answer period, it was disclosed that if we give you more money each month, most of it will get spent and put right back into the economy. However if we give you a tax refund or rebate, you will only spend about one third of it. Also disclosed was that Joe six pack really doesn't matter a whole lot. Most of the spending in this country is done by the wealthy top fifth who also has lower savings due to more exposure in the markets. The poorer bottom 4/5s are deep in debt and spend most of their money trying to keep their payments going and buying the basics and it is the top 5th that do most of the discretionary spending so helping them is what helps the economy. There was a lot of good stuff in his speech but much of it sounded very bearish. I just can't recall all the particulars. Basically he was saying that we are on the brink of a nasty time and so the Fed is being very accommodative with free money trying to pull us out and temporarily getting away from it's more usual fight against inflation. However he also said the Fed can not keep normal boom and bust cycles from happening be it 3 year or 10 year cycles and if there is a long bull cycle, it is only natural for there to be a long bear cycle due to psychological tendencies of investors. Eventually there will be a bear that the Fed can not stop and all they can do is try to make the economy chug along as much as possible in the back ground. He said that tech will not turn around right away since there is still way too much debt and overcapacity but when ever we get out of this, things should start climbing again but MUCH more slowly than the last few years. He admitted that they cut rates aggressively not because of any Macro economic reports like CPI, PPI, employment etc, but because earnings and growth in tech earnings were going down the toilet faster than anyone thought possible. Basically Chambers of CSCO screaming fire at the top of his lungs made the Fed cut rates. -ggg- Last, Greenspan admitted that M2 money supply is growing super fast as he tries to flood the market with money hoping it will turn things around and that eventually that will have to be sopped back up but we are getting away with it because no other country is in any kind of condition to compete with us. Thus as long as the dollar doesn't collapse, he will just keep the printing presses on maximum over drive. As Heinz has pointed out, there is a point where you can't print enough to keep the bubble inflating and it will blow up. Wonder if we will see that point?